What will inflation do in 2026? Experts weigh in

Americans weary of high – and rising – prices may get some relief in 2026.

Or not.

Many analysts believe the economy is finding its footing after several jolts from tariffs, the long tail of the pandemic supply snarls, and more. But some think we’re in for more price volatility – or inflation that’s tamed only by a weak economy. Either way, it seems American consumers may be in for another year of hard times and tough decisions.

Most strategists who think inflation will moderate see it as a symptom of the broader economy gradually slowing down.

“A cooling labor market and softer consumer demand will help ease inflation,” wrote LPL Financial analysts in a 2026 forecast.

They forecast PCE inflation – which is a slightly different measurement than the well-known Consumer Price Index – to slowly decline to 2.5% by the end of 2026, from 2.8% in the most recent reading.

Jennifer Lee, senior economist with BMO Capital Markets, agrees. So many policies from Washington are dampening economic growth that prices just don’t stand a chance, Lee told USA TODAY.

“The softer job environment will limit what businesses can do in terms of raising prices,” she said. The deals and pauses on tariff implementation will help, she said, but so too will slower conditions in sectors that rely on immigrant labor, like agriculture and construction.

More: From tile to toilets, home renovation costs will climb as new tariffs take effect.

A “softer” jobs picture doesn’t necessarily mean bad news, Lee said. She isn’t expecting mass layoffs, and because the labor force is shrinking on its own, she thinks workers will have somewhat better leverage.

Some strategists, like the ones at LPL Financial, expect the economy to grow more slowly in the first half of 2026 and then accelerate later in the year as the pro-growth components of the law popularly known as the “One Big Beautiful Bill Act” take effect.

Others expect the OBBBA’s massive tax refunds to front-load economic growth in the beginning of the year, and then moderate. As USA TODAY previously reported, the IRS is expected to send 104 million taxpayers an average refund of $3,278 because of the tax law changes.

Analysts who expect inflation to remain hot – or to flare up again – see a less benign picture for the economy.

“It’s very hard not to have a higher inflation perspective,” said Steve Blitz, chief U.S. economist at GlobalData. “Inflation’s going to be higher going forward. The question is when.”

Blitz sees the lean labor force, outsize tax refunds, and a higher budget deficit as all contributing to higher inflation. But, he says, those factors will most likely be masked by an economic downturn at the beginning of the year.

“I think the economy is weaker than the top line data indicate,” Blitz told USA TODAY.  “I look at the employment numbers. There’s no way the US economy can expand with declining payrolls. It just doesn’t happen.”

Analysts at Schwab agree. Inflation is edging higher, driven by economic demand, not supply shocks, they pointed out in their 2026 outlook.

“If fiscal aid expands, the labor market holds together, and consumer spending stays on track, there is some upside risk to inflation next year—likely capping the number of Fed rate cuts at two or three,” they wrote. But that scenario is off the table if a “recessionary-like weakening of the labor market” takes place, they add.

But what Schwab has to say about the overall economic landscape is sobering.

“The current economic and market cycle is characterized by instability rather than mere uncertainty,” the analysts wrote. “Uncertainty generally assumes unknowns: elections, wars, Federal Reserve decisions, etc. Instability stems from the inner workings of the system itself.”

What are real-life examples of instability? “Tariffs and their uneven application; Housing supply frozen because existing homeowners have locked in low mortgage rates and can’t move without taking out new mortgages at higher rates; Labor supply altered by immigration shifts.”

They make it hard for forecasters to consider the future, because conditions are changing constantly, the analysts added. Everyone, from policymakers to average Americans, who manage the household budget might agree.

This article originally appeared on USA TODAY: What will inflation do next year? The answer is concerning.